Planemaster Fails To Land Substantial Profit

December 20, 1994|By William Grady, Tribune Staff Writer.

Officials at DuPage Airport had high hopes for the air charter, fuel and flight school business purchased in 1988 for $2.1 million.

Planemaster Services Inc. would be a money maker, it was said at the time, and would generate income for the DuPage Airport Authority, the public agency that operates the much-criticized airfield in West Chicago.

But so far this year, it appears that Planemaster's profits are barely off the ground.

With a month remaining in the airport authority's fiscal year, Planemaster has generated only $23,132 in net income on revenue of more than $6 million, according to its latest financial figures.

Planemaster's surplus through November is roughly $170,000 under what had been anticipated in its revenue forecast for 1994, members of the airport's board were told Monday at their monthly meeting.

"We have too much capital invested in Planemaster for too small a return on our investment," said Richard Rosenberg, a member of the airport board and chairman of its Finance Committee.

Rosenberg is one of the airport board members who favors the sale of Planemaster, or at least some of its assets.

But John Bullock, Planemaster's general manager, said it is misleading to look at the figure for net income. The bottom line, he said, is that Planemaster has generated $136,178 so far in fiscal 1994.

That figure, though, includes funds set aside but not yet spent for engine overhauls on the company's aircraft. Others contend that the reserve account is an asset, but should not be included in operating or net income.

In recent years, Planemaster has been a public relations albatross for the airport authority even when its finances were prettier. Critics have contended the airport authority as a public agency has no business trying to operate a company that competes with privately owned firms.

Planemaster's finances are an example of what happens when a government agency "tries to get into something it really knows little or nothing about," said DuPage County Board Chairman Gayle Franzen, who has been an outspoken critic of the airport authority.

Most of Planemaster's revenue is generated by its charter business, which includes contracts with United Parcel Service. Planemaster also runs a maintenance and flight-equipment repair shop, sells aviation fuel and operates a flight school that took a serious financial hit this year when an instruction program offered through Elgin Community College was discontinued in the spring and summer quarters.

Rosenberg and other commissioners were not on the airport board in 1988, when Planemaster was purchased with little public discussion. But the reason most often offered for the acquisition is that the airport wanted control over the sale of fuel.

"Planemaster is making fairly good profits now, and we feel it has great potential," Thomas Fawell Sr., then airport board chairman and now airport director, was quoted as saying in 1988.

The operation has had difficulty, though, in meeting those expectations.

Planemaster lost money in 1990 and had net income of about $19,000 in 1991. Net income was reported at nearly $325,000 in 1992 and about $400,000 last year.

Through November, charter revenue is up 5 percent over budget forecasts and about 11 percent ahead of last year's figures for the same period. But expenses also are higher than last year's figures.

Revenue from Planemaster's other operations is significantly under the budget forecasts made for 1994-flight school revenue is 44 percent less; maintenance revenue is 43 percent less; and fuel sales are 21 percent less.

In fact, figures show Planemaster would have had an operating loss of about $8,500 for the first 11 months of 1994, except that it collected $20,500 in unanticipated revenue from finance charges-partly as a result of prodding by the board's Finance Committee to collect overdue bills.

Bullock said fuel sales are "moving in a good direction" and that the preliminary figures on maintenance revenues are not accurate until the firm closes the books on work in progress at the end of the year.

It's misleading, he said, to focus on the reported figures for operating income or net income. He also said that depreciation expense is an accounting formality that doesn't reflect the increase in the value of Planemaster's aircraft.

"The company has made $136,178," Bullock said, "and the reality is the company is doing better than the bottom line."

Airport officials, though, say Planemaster's bottom line would look worse than it does if the airport authority's costs for liability insurance were allocated in proportion to risk.

During meetings Monday and last week, airport board members were told that the $785,000 premium the airport authority will pay for liability insurance next year could be reduced by roughly $550,000 if Planemaster were sold.

Officials also noted that only about 30 percent of the airport authority insurance costs are allocated to Planemaster's expenses, though roughly 70 percent of the authority's insurance premium results from Planemaster's business.

A majority of the members of the airport board voiced support for selling all or part of Planemaster at a special meeting in August. But no formal vote has ever been taken.